Exit valuation multiples (price/sales) of private HCM tech companies have bumped up in recent years. The average P/S ratio since 2010 is 4.6x while the median is 2.6x.
2013 has been a banner year for Human Capital Management (HCM) tech startups as the space saw both funding and deal levels reach a five-year high last year. In addition, exit activity in the space has also been heating up since 2009 and hit their highest levels in Q4 2013. Each of the past three years has seen a really successful HCM tech exit – Cornerstone onDemand’s IPO in 2011, Workday’s IPO in 2012 and Benefitfocus’ IPO in 2013. Since 2010, the range of exit valuation multiples for private HCM tech companies has varied from a low of 1.1x to a high of 18.8x. (Note: the underlying transaction level data is available on CB Insights using valuation multiples search.)
According to the CB Insights’ HCM tech valuation data, the average price-to-sales (P/S) ratio has been 4.6x while the median stands at 2.6x. While funding activity in the space has been picking up over the past few years, the HCM tech exit valuation multiple trend has been pretty inconsistent but do seem to be climbing. The average P/S ratio has climbed from 2.4x in 2010 to 4.1x in 2013 while the median grew from 2.4x to 3.7x in the same period. The chart below shows the distribution of exit valuation multiples in the HCM tech space since 2010.
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